Australian Financial Expert Says First Home Buyers Should Not Miss Opportunity in Next 6-12 Months

An auction sign stands on display in Blacktown, Australia, on Feb. 14, 2015. Mark Metcalfe/Getty Images

A financial expert has advised Australians aspiring to be homeowners to take advantage of the current interest rate situation to make their dream come true.

The Reserve Bank of Australia (RBA) has implemented an interest rate hiking cycle since May 2022 to combat high inflation, which took the official cash rate from the historic low of 0.1 percent to the current 4.1 percent.

However, a significant drop in inflation has caused the bank to put its monetary tightening policy on hold for the second month in August.

With a softening labour market, many economists have predicted that the current interest rate hiking cycle is likely to end soon.

In a recent parliamentary hearing, RBA Governor Philip Lowe said there was a perception among Australian households that interest rates were about to peak.

The governor also forecasted that house prices would likely lift after the RBA stopped tightening the money supply.

The Right Time to Enter the Housing Market

Alex Jamieson, a financial planner and the founder of AJ Financial Planning, told The Epoch Times there could be a good opportunity for aspired homeowners across the country in the next few months.

“It is likely over the next six to 12 months, we will see a larger number of investors exit the property market as the financial realities for them no longer make sense, largely due to cash flow pressures with daily living costs,” he told The Epoch Times.

“This will present opportunities for first-home buyers to take advantage of the current uncertainty in the market.”

Mr. Jamieson also noted that once the interest tightening cycle peaked, a large number of buyers could return to the housing market as there would be a greater level of certainty at the time.

This would likely result in a higher level of competition between buyers.

Prospective buyers attend an auction of a residential property in Sydney, Australia, on May 8, 2021. Lisa Maree Williams/Getty Images

According to real estate data provider CoreLogic, national home values rose 0.7 percent in July, which was the fifth consecutive increase following a 9.1 percent drop from record highs in April 2022.

While house prices still went up, CoreLogic noted that the growth had lost momentum in the last couple of months.

Under the current housing market and interest rate situation, Mr. Jamieson suggested that potential homeowners consider applying for a mortgage.

“A variable loan or a 12-month discount fixed loan should provide plenty of opportunity in the future if interest rates should drop the longer term,” he said.

How to Invest Your Spare Funds

For Australians who have spare funds and want to maximise their returns, Mr. Jamieson said there were many available investment options depending on investors’ risk appetite.

“For very risk-averse investors, there is a real opportunity to lock in fixed-interest investments at all-time highs,” he said.

“The capital notes and preference shares segment of the market is particularly attractive at the moment paying around seven percent per annum.”

In addition, the financial planner said if Australia and the United States did not fall into a recession in the next six months and if the RBA managed to achieve a soft landing with the economy, investors with high-risk tolerance might consider investing in equities.

A soft landing refers to a situation where a reserve bank uses high-interest rates to reduce inflation, resulting in a slowdown in economic growth that avoids a recession.

However, things are a bit trickier for residential property investors, as Mr. Jamieson believed it would take some time for their investments to bear fruit if they invested in the market now.

“If one has a much longer time horizon over seven to ten years plus, I suspect with the large immigration intake in Australia and the housing shortage, we should see some good growth down the road,” he said.

“But one might need to wait for at least three years before this starts to transpire.”